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Time Series
Time Series
Outline
Contents
Components of a Time Series
Multiplicative and Additive Models
Moving Averages as a Method for Smoothing of a Series
Decomposition of a Time Series
a. Trend
b. Seasonal
c. Cyclical
d. Random
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Time Series
Cyclical Component
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Time Series Components
There are four basic elements of Time series.
Irregular fluctuations: these are due to uncontrolled factors like market forces,
factors beyond recognition, major economical movements etc.
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Time Series Data
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
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Trend Component
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
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Seasonal Component
110
105
100
95
90
85
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
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Cyclic Variation
variable of interest
time
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Random Variations
variable of interest
time
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Analysis of a Time Series
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Decomposing Time Series
Types of Variation
Trend (T)
Seasonal (S)
Cyclical (C)
Random or Irregular (I)
Additive Model
Zt = Tt + St + Ct + It
Multiplicative Model
Zt = (Tt )(St )(Ct )(It)
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Moving Average
Time: 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Data: 15 12 11 18 21 16 14 17 20 18 21 16 14 19
Five-period moving average: - - 15.4 15.6 16.0 17.2 17.6
17.0 18.0 18.4 17.8 17.6 - -
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Comparing Original to MA
O r ig in a l S e r ie s a n d F iv e - P e r io d M o v in g A v e r a g e s
20
Z
15
10
0 5 10 15
t
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Centered moving average
Centering is required if the period of moving
average is Even.
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Ratio-to-Moving Average for Quarterly Data
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Moving Average Calculation
Simple Centered Ratio
Moving Moving to Moving
Quarter Sales Average Average Average
1998W 170 * * *
1998S 148 * * *
1998S 141 * 151.125 93.3
1998F 150 152.25 148.625 100.9
1999W 161 150.00 146.125 110.2
1999S 137 147.25 146.000 93.8
1999S 132 145.00 146.500 90.1
1999F 158 147.00 147.000 107.5
2000W 157 146.00 147.500 106.4
2000S 145 148.00 144.000 100.7
2000S 128 147.00 141.375 90.5
2000F 134 141.00 141.000 95.0
2002W 160 141.75 140.500 113.9
2002S 139 140.25 142.000 97.9
2002S 130 140.75 * *
2002F 144 143.25 * Rahul Chandra
*
Seasonal Index
Quarter
Year Winter Spring Summer Fall
Seasonal
Index 110.15 97.45 Rahul Chandra
91.28 101.11
De-seasonalised sales
Seasonal Deseasonalized
Quarter Sales Index (S) Series(Z/S)*100
1998W 170 110.15 154.34
1998S 148 97.45 151.87
1998S 141 91.28 154.47
1998F 150 101.11 148.35
1999W 161 110.15 146.16
1999S 137 97.45 140.58
1999S 132 91.28 144.51
1999F 158 101.11 156.27
2000W 157 110.15 142.53
2000S 145 97.45 148.79
2000S 128 91.28 140.23
2000F 134 101.11 132.53
2002W 160 110.15 145.26
2002S 139 97.45 142.64
2002S 130 91.28 142.42
2002F 144 101.11 142.42 Rahul Chandra
Fitting Trend Line
180
170
160
S a le s
150
140
130
120
1992W 1992S 1992S 1992F
t
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Question 1